optical storage media industry report-1
TRANSCRIPT
Optical Storage Media Industry Analysis
Strategic Management
Team Members:
Maja H. AhmetovicDavid BrownSaahil GoelRahul KapoorArvind KhemkaNikhil Mudgal
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TABLE OF CONENTS
1. Definition of the Industry................................................3
2. Industry’s Dominant Economic Traits......................4
3. Analysis of competitive forces that impact competition; Porter’s Five Forces Model........................8
4. What factors or trends are causing industry structure to change?.................................................................13
5. Competitor Analysis..........................................................14
6. Key Success factors..........................................................15
7. Future Outlook.....................................................................18
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1. Definition of the Industry
The optical storage media industry is currently estimated at $6 billion,
and it is growing at a rate of 20% per year1. The optical storage
industry includes compact discs (1st Generation Discs), digital video
discs (2nd Generation Discs) and high density discs (3rd Generation
Discs).
Since this industry is dependent on research and innovation, in the
past there have been several different viewpoints regarding
technology standardization: from the videotape format war between
VHS and Betamax in 1980’s, to the 2005 war between Sony and
Toshiba over Blu-Ray and HD-DVD. Notably, in 1993, Philips and Sony
developed the MultiMedia Compact Disc and Toshiba, Time Warner,
Matsushita Electric, Hitachi, Mitsubishi Electric, Pioneer, Thomson, and
JVC developed the Super Density Disc. After IBM’s president, Lou
Gerstner led an effort to unite the two camps, the Super Density Disc
was adopted, which is the DVD we know today.
Optical discs are more or less commodity-like. Many of the top CD
manufacturers are already sourcing from external companies and
simply selling the CDs after branding them. Additionally, most
manufacturers try to differentiate their product by marketing and
positioning themselves. Therefore, with high spending on marketing
and previous brand equity, many of the CD/DVD manufacturers are
able to command higher prices for very little apparent increase in
quality. For example, while Memorex positions itself as a
low-quality/low-cost producer, Sony positions itself as a
high-quality/high-cost manufacturer. However, it is not clear whether
1 http://www.wtec.org/loyola/hdmem/01_02.htm
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the same CDs are supplied by the same external manufacturer to both
the upper-segment manufacturers and the lower-segment ones.
It is important to note that the industry involves two players. One
sector simply manufactures the optical storage media. The second
sector purchases the goods from the manufacturers and is responsible
for marketing, promotion, and sales. The second sector also funds
research, development, and new product innovation to stay
competitive in the marketplace and also to serve the changing needs
of the customer. For the purpose of this case, we are considering the
latter.
With the advent of low cost storage mediums, digital audio, video,
games, software and documents became easy to pirate and distribute.
This has become a cause for alarm for many original content
producers. Piracy and Digital Rights Management issues are
particularly a cause for concern in Asian and African countries where
law enforcement is lax with respect to piracy.
2. Industry’s Dominant Economic Traits
Market concentration:
The industry can be described as an oligopoly with a few major players
that include Memorex, Maxell, Verbatim, TDK, Philips, Sony, and Fuji.
The nature of this market is such that it can be inferred that the
actions of one player are always known to the others. Thus, the
decisions taken by one firm will likely affect those taken by others, and
informal collusion may inevitably take place to avoid a “price war”.
Additionally, many former manufacturers and sellers who did not have
optical storage media as their core business have decided not to
participate in sales and post-sales support activities.
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Moser Baer is the world’s second largest optical storage media
manufacturer, supplying CD-Rs to the top firms in optical storage,
including Memorex/Imation, TDK, Verbatim, and Staples. However, the
majority of Moser Baer’s revenue is from exports – with only a quarter
from domestic sales.
Rate of Technology change:
In 1979, Philips and Sony began a consortium which resulted in the
production of the compact disc in 1983. The impetus for developing
this technology was the need for higher storage capacity. However,
data can also be stored on this media for longer periods of time as
compared to magnetic media, without any effect on the quality.
Therefore, today, compact discs have replaced conventional magnetic
storage media such as floppy disks, especially since the introduction of
re-writable CDs. Initially, the compact disc was mainly used for
distribution of audio content, but it soon became extremely popular for
storage and distribution of computer data. Over the years, increased
demand and low-cost overseas manufacturing have drastically reduced
the unit price for CDs and CD-ROMs. This further led to the wide-
spread acceptability of compact discs as the standard in optical
storage media technology.
Compact discs have also slowly replaced VHS and audio cassettes.
These were known as the “1st Generation” optical discs. The “2nd
Generation” optical discs were created to store even larger amounts of
data – specifically TV-quality digital video – giving rise to the
production of the Digital Video/Versatile Disc or DVD in 1995. The “3rd
Generation” optical discs are Blu-Ray Disc and HD-DVD. However,
there is no single standard for 3rd Generation optical discs because
each of these technologies is owned by a separate company. Although
the Optical Storage Technology Association, established in 1992,
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currently governs more than 85% of the optical storage media
manufacturers worldwide, 3rd Generation technology has led to non-
standardization within the industry and to “format wars” between the
optical media manufacturers.
Exhibit 1 depicts the introduction of new technologies with respect to
time and increased storage capacity over the years2, showing a history
of rapid innovation. Due to advances in optical storage manufacturing
technology, the price of optical storage media has fallen by
approximately 95% over a period of only ten years. For example, the
cost of a CD-R in 1995 was about $4.00 per unit, and now it costs
about 17 cents per unit.
Rate of product innovation:
Due to the decreased cost of hard disk storage devices and a demand
for higher capacity discs, firms engage in rapid product development
to keep pace with changing customer tastes. However, rapid advances
in technology have resulted in lower growth for old products and
higher growth for newer products. Consequently, advancements in
technology tend to change the very structure of the industry. For
example, DVDs were introduced in 1995 after years of research and
development prompted by the need for higher storage capacities.
However, Sony and Toshiba have recently launched their own version
of high capacity discs – Blu-Ray and HD-DVD – which are not
compatible with conventional CD/DVD players.
Additionally, technology firms spend 6%3 of their revenue on research
fo product innovations that will hopefully enable them to differentiate
themselves. Some companies also try to establish proprietary rights
that would allow them to “monopolize” the market, which would lead
2 http://www.wtec.org/loyola/hdmem/01_03.htm3 Google Finance – Imation was an example
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to higher revenues in the long. For example, if Sony’s Blu-Ray format
was to be standardized, all DVD reader/writer firm would have to
manufacture according to Sony’s specifications, all entertainment/data
providers would need to purchase this technology from Sony, and even
compact disc manufacturers would need to comply with Sony’s
standards. This would mean a substantial royalty or premium for Sony.
These kinds of format wars have been prevalent in the industry from
its inception.
Entry/ Exit Barriers:
It is useful to analyze entry and exit barriers by splitting the industry
into the following classifications:
1. New product innovation, research, marketing, and branding
2. Manufacturing and production of current optical storage media
technology
Since many companies outsource their manufacturing processes to
countries in Asia for relatively old technologies such as CD and DVD,
new opportunities have opened up for players in the manufacturing
classification. The manufacturing operations of this industry are
capital intensive, but they do not present new entrants with very high
entry barriers4 .
On the other hand, the entry barriers to get into the mainstream
marketing, branding, and innovation classification are extremely high.
The presence of large, well-established incumbents in the industry
makes it extremely difficult for new comers to enter the market and
establish a brand name without the experience of past research and
innovation.
Industry Profitability:
4 http://www.hoovers.com/computer-manufacture-/--ID__212--/free-ind-fr-profile-basic.xhtml
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The optical storage media industry is a commodity business with very
low switching costs for consumers. This creates intense competition in
the industry, which dramatically drives down prices and, therefore,
operating margins. The net profit margin in this industry is 8.6%, but
the net operating margin is 2-3%5. In this scenario, economies of scale
are essential for profit generation because the amount spent on
operations alone is not able to generate significant returns.
Exhibit 2 depicts the performance of the optical storage media industry
in comparison to the Dow Jones index over the past twenty years.
Even though the Dow Jones has been relatively stable, the
performance of the optical storage media industry has been rather
volatile.
As shown in Exhibit 2, the optical storage media industry outperformed
the Dow Jones index in from 1992 to 1994 and also from 1997 to 2000.
This was due to the establishment of the Optical Storage Technology
Association in 1992 and the launch of Digital Video Discs in 1995. This
pattern indicates that the industry thrives on technological
advancement and product innovation, and that product lifecycles are
relatively short, ranging from five to twelve years.
3. Analysis of competitive forces that impact competition; Porter’s Five Forces Model
Please refer to Exhibit 3 for a graphical representation of Porter’s
Analysis.
Bargaining Power of Suppliers: Low to Neutral
For technologies that are proceeding towards obsolescence, companies
outsource these manufacturing operations to low cost, off-shore
destinations such as India, Taiwan, and other parts of Asia. Here,
5 Yahoo Finance Industry Reports
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many suppliers are available because the barriers to entry in the
manufacturing business are very low. As of 2004, about 77% of the
CD-R optical storage manufacturing industry was located in Asia (39%)
and Taiwan (38%), with only 3% in the United States. Additionally,
75% of the world’s DVDs are manufactured in Taiwan, 15% in Japan,
and 8% in Asia. The multitudes of suppliers compete with each other
on cost and quality, and, therefore, exert low bargaining power on the
companies buying from them.
However, there are some risks to outsourcing, as off-shore
manufacturers may be able to forward-integrate and directly sell these
optical storage products (CDs and DVDs) that are towards the end of
their lifecycles in markets that are not currently dominated by other
prominent players. For example, Moser Baer (India) supplies to major
brands like TDK and Memorex/Imation; at the same time, it sells the
same product in the Indian market with its own brand name and has a
10% market share in the world optical storage media market6.
Other industry inputs are labor, capital, and marketing. While the
manufacturing end is highly automated and not very capital intensive,
massive research and development expenditures are required in order
to be innovative and, thus, competitive. Marketing and advertising are
mostly commodity-like in nature and, therefore, do not exert much
influence on these companies.
Bargaining Power of Customer: High
Consumers of optical storage media can be divided into two main
categories:
1. Individual Customers: The bargaining power of a particular
individual customer is considered to be low. However, because there
6 http://www.warburgpincus.com/portfolio/ViewCompany,id,72.aspx
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are no switching costs and minimal product loyalty, as a whole this
consumer group exercises some power over the industry. There is also
very low differentiation with products that have already passed their
growth stages, where further innovation is no longer possible.
2. Enterprise Customers: The bargaining power of enterprise
customers is very high since this product is a commodity to them. This
consumer group has the power to enter into large contracts with any
company it chooses and may switch over to another provider and take
away a substantial portion of business. Therefore, optical storage
manufacturers try to maintain relations with enterprise customers in
the music, entertainment, software, and gaming industries, and with
retailers selling optical storage media for home and office use, such as
OfficeMax or Staples.
Optical storage media manufacturers can ensure customer loyalty by
introducing proprietary products, which force enterprise customers to
purchase only their product, or risk incompatibility. For example, Sony
has launched PlayStation 3, a popular video gaming console, pre-fitted
with Sony’s Blu-Ray disc reader. Because only Blu-Ray discs can be
used on this device, Sony has effectively mandated all game
manufacturers to produce their content on Blu-Ray discs if they want
to be compatible with the PlayStation 3.
Threat of New Entrants: Low
Several large corporations have been present in this industry for a
number of years, and have established brand name recognition,
distribution channels, industry relationships, and significant internal
experience knowledge. Due to these reasons, it is difficult for a
newcomer to enter this business. Furthermore, since profitability in
this industry is driven by new product innovation, new comers will not
have the advantage of years of research and product development.
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Thus, the threat of new entrants into the product innovation and
marketing end of the industry is not significant.
Threat of Substitutes: High
This industry faces a high threat from substitutes due to the speed of
innovation in other storage mediums and the revolutionary increases
of internet bandwidth (along with dropping costs).
The following are some examples of substitutes:
a. Flash Drives: various companies manufacture compact USB
flash drives in high capacities (8 GB) for low price. Since these
are re-writable, convenient, and do-not require a special
reader/writer, they have been largely adopted by consumers.
b. Zip Drives/External Hard Drives: these products are available
in extremely high capacity (50-100 GB) and are also re-writable,
but are not as portable as DVD/CD or Flash Drives.
c. Internet: with increasing bandwidth and decreasing costs, high
speed internet has revolutionized the distribution and sharing of
digital content. This trend may affect the profitability of the
optical storage media industry in the long run. The internet
already substitutes optical drives/flash drives for file sharing
amongst individuals and enterprise. Further, software
companies have also started using the internet for distribution
and on-line payment, as it is more convenient. With
entertainment and music companies also riding on the internet
bandwagon, the situation is quite bleak for the optical storage
media industry.
Even though threats from substitutes are quite high in this industry,
there are some limitations. For example, distribution of digital
content such as movies (DVDs) and music (CDs) through retail
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channels and online stores is still prevalent, and home audio and
video equipment is still widely used to enjoy these media storage
devices. Further, piracy and copyright laws concerning digital
content make it more conducive for digital media to be distributed
via optical storage media rather than over the internet.
Rivalry: High
Since each company has a small share of the market (on average
15%), there is intense competition amongst the players. Further,
because of the commodity-like nature of the product, there have been
various attempts to differentiate on the basis of quality, marketing,
and innovation. Innovation, by far, has been the largest factor
contributing towards product differentiation.
Throughout the history of this industry, companies have tried to come
up with proprietary technologies to capture more market share, which
have resulted in format wars and polarization. In a recent example,
Sony and Toshiba have been battling over two different formats, Blu-
Ray and HD-DVD, to become the next 3rd generation high capacity
optical storage medium. Because of a lack of standardization and the
existence of multiple players, each one has tried to outdo the other.
However, Sony’s move to standardize its PlayStation 3 gaming console
with Blu-Ray disc readers forced Toshiba to forfeit its HD-DVD format.
In this way Sony, was the winner in the 3rd generation disc “format
wars” and has gained a considerable amount of market share.
Furthermore, because of intense competition, many of the media
manufacturers have decided to become suppliers to the major brands,
and have opted out of sales and post-sales activity. For example, TDK
relies on Imation for these services, since optical storage media
product sales are the core business of Imation. In this way, TDK
reduces its cost structure by “outsourcing” this part of its value chain
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and Imation is able to capture more market share by “consolidating”
the industry.
4. What factors or trends are causing industry structure to change?
Factor EffectTechnology Relatively high rate of technology change as compared to
other storage media manufacturing industries. With the increasing rate of technology change, the unit prices for optical storage mediums have dropped substantially. Furthermore, several manufacturers run the optical media storage industry as a non-core business and therefore do not engage in selling and after-sales support activities directly. However, they provide their products under their own brand names to other manufacturers and marketers who have these businesses at their company’s core.
The drop in prices has also led to the opening up of newer consumer segments – such as home and individual customers who were not very savvy on using these storage media earlier owing to the high costs.
Product Innovation
In addition spending on marketing and promotion, companies in the optical media storage industry have to spend heavily on research and development to stay competitive in the marketplace. R&D also allows companies to create products in result to anticipated consumer demand trends. Consumer requirements for increase in the capacity of storage media have resulted in R&D efforts by companies in this domain. Another reason for extensive R&D is to be able to launch a proprietary technology in the market and “force” consumers to accept it to capture a bigger chunk of the market share. In this way, companies try to monopolize the market.
This has also resulted in “format wars” which cause market
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polarization into camps supporting different formats at the initial stages of any new technology innovation. Another reason for companies to try and standardize their formats is because the media recorder and reader sales would also increase for the company standardizing their format.
Globalization The prevalent outsourcing trend has also affected this industry. When no further innovation is possible in a technology, companies increasingly prefer to source their products from manufacturing companies overseas – especially from India, China and Taiwan.
This results in cost savings for these companies, business opportunities for developing countries in Asia, lower cost to the consumer and higher profitability to the company.
5. Competitor Analysis
Key players7
Memorex TDK Maxell Fujifilm Verbatim
Top five players make a total of 70% of the market share
Overview of key competitors:
Memorex TDK Maxell Fujifilm VerbatimMarket shares 29%8 13%9 ~9.1% ~9% 19%10
Brands MemorexProduct line (in optical storage media)
CD-RCD-RWPocket CD-R/RWDVD-RDVD+RDVD-RWDVD+RWDVD+R Double
CD-RCD-RWDVD-RDVD+RDVD-RWDVD+RWDVD-RAMBlu-Ray BD-RBlu-Ray
CD-RDVDHD-DVDBlu-Ray
CD-RDVD LabelflashDVD-RAMDVD+R/+RWDVD-R/-RW
CD-RCD-RWDVD-RDVD+RDVD+RWDVD-RWDVD Digital MovieDVD-RAM
7 http://www.twice.com/article/CA6296865.html8 http://goliath.ecnext.com/coms2/summary_0199-3856724_ITM9 http://www.entrepreneur.com/tradejournals/article/130378452.html10 http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VM5-4JN2CY1-8&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=498483169885ccd4e4eec0803eb752c9
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layer BD-RWMarketing/sales Advertising
, collaboration with retailers
Rebranded as TDK Life on Record
Co-marketing with retailers
Ad campaign in the US
Weak…
Focus Tech needs; Average user; wide product selection
Separating Average user and Professional needs
Average User with a Pro line for higher demand
Average User
Average User; focus on personalization
Alliances/ventures
Recently Acquired by Imation Corp.
Recently Acquired by Imation Corp.
Purchased Silontec
IBM Big Fish Games
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Strategic Management – Optical Media Storage Industry Analysis
Some of the key services/ infrastructure and offerings remained constant for every key player in the industry. For example, each one of them focused on maintaining a strong alliance/ long term contracts with the provider of the services which use the optical media for entertainment or data storage purposes. The primary focus always remained on higher quality with superior manufacturing practices. An average customer in the market was targeted by every major player. As this industry is highly influenced by the technology advancement every major player in the industry had their dedicated R&D division for technological improvisations.
Memorex’s highest market share can be attributed to the high market presence and brand equity of Imation Corp. in the optical DVD/CD industry. Although TDK offered a wide range of products as compared to Memorex, their market share is sufficiently low as because Memorex’s marketing strategy focused not only on positioning themselves as a high quality brand but also establishing a strong customer relationship. The emphasis on strong marketing was evidently seen in the companies with bigger market share with an exception of Verbatim which attributes its high market share to high quality offered in the optical media storage industry. Further, Verbatim is one of the oldest players in the data storage industry and has a certain brand equity attached with it because of its marketing efforts over the years.
A strong exception is seen in the case of Maxell. Though the company focuses on strong marketing and R&D, its market share is still less than the major competitors with similar capacity in the market. This can be attributed to the organic growth model which the company follows. Whereas Maxell and Verbatim focused on corporate customers other players kept a differentiated customer profile.
Refer to Exhibit 4 for detailed competitor analysis data sheets
6. Key Success factors
Consumer market
This market is dominated by movie media, gaming and some data storage
interests. The future success in the consumer market will be a co-
evolutionary arms race where only one product can become the industry
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Strategic Management – Optical Media Storage Industry Analysis
standard. Consequently, all eyes have been on Blu-Ray and HD-DVD to see
who can create, distribute and market a product that permeates the public
first. As mentioned earlier, there is great incentive to dominate this market
because the winners will enjoy the royalties, premiums and market share.
Factors for the success of a new consumer optical storage device are as
follows:
1. Value to customer (+ for positive, 0 for neutral, - for negative)
o Image quality: From 720×480 or 520 horizontal lines with basic
DVD to 1920×1080 or 1080 lines with Blu-Ray or HD-DVD (+)
o Sound quality: Although there is an increase in sound bit quality,
this feature is almost impossible for your average user to notice.
However, this improvement could still be used in marketing. (0)
o Size/convenience: There is no difference in the size of disks and
it offers no improvements in terms of ease of use for the
consumer. (–)
o Interface/ player options/usability: Although there are slight
changes in interface and a few improved features (better quality
in slow-motion), there have been no major changes from DVD
format. (–)
o Price: New Blu-Ray players are 4-5 times more expensive. (–)
HD-DVD players are about 1.5 times more expensive.
(+)
Both company’s disks are about twice as much on
average. (–)
o Compatibility: Improvements in image quality can only be
observed on High Definition Television. (–)
o Data capacity: HD-DVD (30 gigabytes) Blu-Ray (50 gigabytes-200
gigabytes version in creation) (+) for Blu-Ray
o Multiple uses: Gaming : Blu-Ray (+)
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Strategic Management – Optical Media Storage Industry Analysis
In terms of explicit value added to the average “movie media” customer,
there is very little added value other than image quality. Although this is
a very valuable feature to most consumers, Blu-Ray and HD-DVD may not
as easily dominate the “movie media” segment as DVD did against VHS
based on this lack of value added to customer (in comparison to VHS and
DVD). Consequently, for Blu-Ray or HD-DVD to permeate the public, they
must focus on maximizing customer value, Distribution, marketing and/ or
price.
2. Price
o HD-DVD has decided to compete on this front by working with
Wall-mart to sell their players for $198.0011. However, this move
may be too late as Toshiba has announced the discontinuation of
their HD-DVD players.
3. Distribution
o Motion picture companies: This is a highly volatile and highly
competitive arena for success. It appears that Blu-Ray has
dominated this market saving for Paramount Pictures/
Dreamworks12.
o Retail: This is very similar situation to motion picture companies;
Major Distributors include: Wal-Mart, Target, Blockbuster, Netflix
and Microsoft. Blu-Ray is also in the leading in Retail dominance.
o Although not a common channel for distribution, Blu-Ray was
successful in spreading there technology into many households
promoting the same technology for both movies and games. For
example, even though Wal-Mart decided to back HD-DVD, Blu-
Ray still had a presence through their gaming system.
4. Multiple use technology
11 New York Times, Brook Barnes, Published: August 21, 200712 Although it appears most likely that they may reverse their commitment made to HD-DVD in August 2007
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Strategic Management – Optical Media Storage Industry Analysis
o A part of Blu-Ray’s success can be attributed to their ability to
expand the use of their product to other arenas. Since the value
given to the average movie watching customer is not terribly
high, maximizing other uses was essential to Blu-Ray’s success.
Not only did Blu-Ray add gaming technology, but they continued
to expand the data holding capabilities far beyond what is
needed for movie media. This has allowed them to be a better
competitor in data storage and a more promising investment for
the future of other industries.
5. Marketing
o Since this product can easily be seen as a commodity (especially
in the movie media segment), competing companies must
advertise heavily on issues such as: brand image, features,
products (including the movies that motion picture company’s
support), and their promise for being the future standard in
technology.
7. Future Outlook
When considering the future success of these two competing products, the
major points of strategic difference must be considered. As seen above,
both companies were competing on the same areas except: multi-use
technology, data storage and price. HD-DVD decided to use a lower price as
leverage against Blu-Ray. This strategy aligns well with the level of added
value this product delivers; however, they may have made this choice too
late in the game13.
13 Jeffrey Katzenberg, chief executive of DreamWorks Animation, said "Today Toshiba is making HD-DVD players available at $299, which is a first time that it's really been at an affordable price. It's a game-changer, what they're doing." MSNBC, Aug. 20, 2007
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Strategic Management – Optical Media Storage Industry Analysis
Blu-Ray has promoted their technological advantages and multi-use features.
This is clearly the superior platform for future success. First, customers are
increasingly more technologically savvy and prefer to invest in technologies
of the future. Second, Blu-Ray will be better equipped to become the leader
in consumer and small business data storage; Blu-Ray plans to soon have
300 gigabytes of storage per disk at a relatively low price point for such
storage capabilities. Although their price premium may deter some potential
buyers, there gaming systems, which also play movies, seem to have
compensated for this potential downfall. Finally, Blu-Ray’s technological
advantage will serve them well as games evolve to demand greater storage
capabilities.
In conclusion, the differences in each player’s strategy has had great impact
in both the explicit points mentioned, and also in the sales propositions to
both distributers and the public. Unlike VHS vs. Betamax (VHS being
technologically inferior to Betamax), the technological advantage sets Blu-
Ray to win this battle and we can expect to see a similar trend in the future.
Enterprise back-up
Optical storage has had a small impact on this market thus far based on its
limited storage capabilities. Digital tape technologies designed in the early
1990’s still dominate this market. However, this situation is likely to change
as Blu-Ray based UDO systems plans to offer a 300 gigabyte disk and
InPhase Technologies plans to release a 1.6 terabyte optical disk14. In
addition, data write-times must also be considered as a large factor in this
industry. With write times ranging from 20MBps to 120MBps, the winner in
this sector will most likely strike a balance between, price, data storage
capability, and write time. Competition in this market is not as heavy in
14 “Murky Future of Optical Disks” Processor Editorial, November 3rd 2006
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Strategic Management – Optical Media Storage Industry Analysis
marketing and advertising, but rather is based in pricing, distribution, and
technological advancements.
Appendix
Exhibit 1
Exhibit 2
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Strategic Management – Optical Media Storage Industry Analysis
19871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
Performance of Optical Storage Industry Vs. Dow Jones Index
Optical Storage IndustryDow Jones Index
Year
Annu
al R
etur
ns
Exhibit 3
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Strategic Management – Optical Media Storage Industry Analysis
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Exhibit 4
Memorex International (newly acquired division of Imation Corp)
Strategic Management – Optical Media Storage Industry Analysis
Strategy
M&A/Partnership Acquired by Imation Corp in 2006
Product line CD-R – Spindle; -with Slimline Jewel Case; Black; Cool
Color; AquaGuard Inkjet Printable; Inkjet Printable Surface; LightScribe; Cool Colors Lightscribe; Pro Gold; Cool Color Designer Series;
CD-RW- 1x-4x; 8x-12x High Speed; 16x-24x Ultra Speed Pocket CD-R/RW Music CD-R – Music; Cool Color Music; Black DVD-R – 16x 4.7GB; Memory Keeper Boxes; Lightscribe;
4.7GB Printable; AquaGuard Inkjet Printable; 16x Cool Colors; Labelflash
DVD+R - 16x 4.7GB; Memory Keeper Boxes; 4.7GB Printable; Lightscribe; 16x Cool Colors; 8x Double Layer; 2.4x Double Layer
DVD-RW – 4x; 2x DVD+RW – 8x; 4x DVD+R Double Layer – 8x; 2.4x HD DVD-R Blu-Ray BD-R – Recordable Blu-Ray BD-RE–Rewritable
Marketing sales Became a household name with the use of the “Is it live or
is it Memorex?” slogan. Marketing campaign urge family to buy before needed. Focus on getting the products on store shelves. Brand is carried in 21 of the 25 top retailers in the US.
Objective Most widely recognized and respected
name in consumer electronics. Preeminent brand in CD and DVD media,
optical drives, flash drives and media accessories.15
The Memorex brand is the number one U.S. provider of optical media, outperforming all other brands of CD and DVD media.
15 http://www.memorex.com/html/comp_hist.php
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Strategic Management – Optical Media Storage Industry Analysis
Name is derived from MEMORy and EXcellence
Assumptions Revolutionizing the home theatre experience since 1971. “Memorex ships 1 billion CD and DVD discseach year to
stores nationwide — enough to carpet the entire state of New York!”16
Capacity Specializing in the home theatre
experience. Carries a complete line of optical media
storage and readers. Integrated into Imation’s family of products Strong brand equity, therefore retaining its
brand name Advertising is done through billboards,
flyers and in-store promotion.
16 http://www.memorex.com/downloads/news/About_Memorex.pdf
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Strategic Management – Optical Media Storage Industry Analysis
TDK (newly acquired division of Imation Corp.)
Strategy
M&A/Partnership Wholly owned subsidiary of Imation Corp since 2007 In a licensing agreement with TDK to sell the TDK Life on
Record products exclusively to Imation
Product lines CD-R – PrintOn; LightScribe; Photo Archival CD-RW Music CD-R Music CD-RW High Speed CD-RW 8cm CD-R DVD+R – Pro; Thermal; Inkjet Printable DVD-R DVD+RW DVD-RW DVD Double Layer DVD-RAM Mini DVD – ScratchProof; Double Sided ScratchProof; PrintOn Video DVD PrintOn DVD LightScribe DVD Blu-Ray – 25GB BD-R Blu-Ray – 25GB BD-RE
Marketing High brand equity. Name is kept from the original company to strengthen
market share.
Objective Focus on cutting-edge Developing new coatings for Blu-Ray disks
to make them scratchproof (Durabis product line)
Development of quad-layer Blu-Ray disks Maintain market share Licensing agreement lasts for either 5 years
or as long as the product is being manufactured, whichever is longer.
Long-term agreement with TDK to keep the name licensed for 26 years.17
17 Imation Corp. 2007 10-K Annual Report
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Strategic Management – Optical Media Storage Industry Analysis
Assumptions
None
Capacity Strong R&D. With the Imation brand backing TDK they
have industry experts to develop the brand further.
Maxell
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Strategic Management – Optical Media Storage Industry Analysis
Strategy
M&A/Partnership Wholly owned subsidiary of Hitachi Maxell Ltd. Acquisition of Silontec Corporation
Product lines CD-R – 5Pack; 5 Pack Carded; 10 Pack; 25 Pack Spindle; 50 Pack
Spindle; 100 Pack Spindle; 25 Pack Spindle – Color; 30 Pack – Color; 50 Pack Spindle – Color
CD-R Music – 3 Pack; 5 Pack; 10 Pack; 20 Pack; 30 Pack Spindle; 50 Pack Spindle; 15 Pack Color; 20 Pack Color; 30 Pack Color; 50 Pack Color Spindle
CD-R Design Series CD-R Printable – Inkjet; Thermal CD-RW – 1x-4x; High Speed CD-R Pro – Pro; Photo Pro DVD-R DVD-R Printable – Inkjet; Thermal DVD RAM – Cartridge; Disk DVD-RW DVD+R – Regular; Printable DVD+RW DVD+R – Double Layer HD-DVD-R Blu-Ray – BD-R; BD-RE
Marketing Adherance to the logo created at founding the company Advertising cost is 6% of SG&A Name is derived from MAXimum capacity dry cell High environmental involvement conforming to ISO14001
Certification.
Objective Speed, focus and creativity Maintain market share Organic growth Growth through acquisitions of key
partners Expansion of marketing strategy in order to
grow the overseas markets and increase sales.
Outsourcing production while maintaining an eye for quality, a cost-reducing strategy.18
18 Maxell: Maxell Hiatachi Ltd. 2007 Annual Report
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Strategic Management – Optical Media Storage Industry Analysis
Assumptions
None
Capacity Strong R&D. R&D expenditure as a percentage of sales
was 4.3% in 2007. (average for past 5 years is 4.5%)
Diverse industry and balanced geographical operations to protect against demand fluctuation in sector or geography
Strong financial Strong ROA and ROI
Fujifilm
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Strategic Management – Optical Media Storage Industry Analysis
Strategy
M&A/Partnership Succeeded the business operation of Fuji Photo Film Co.,
Ltd. In 2006 Partnering with IBM in development of new high-capacity
storage servers.19
Product lines CD-R – Jewel Case; 50 Cake Box DVD-R – 4.7 GB 120min; 8cm 2.6GB 60min; 1.4GB 30min DVD-RW – 4.7GB 120min; 8cm 2.8GB 60min; 8cm 1.4GB 30min DVD+R – 4.7GB 120min; Dual Layer; LabelFlash DVD+RW – 4.7GB 120min DVD-RAM – 9.4GB 240min SP mode; 4.7GB 120min SP mode
Marketing Television broadcast advertising. Online targeted advertising for specific audiences. Magazine audience fliers.
Objective Gain market share in the US through
heavy advertising. Research in holographic storage
technologies in order to obtain the cutting-edge area.20
19 http://www.fujifilmusa.com/JSP/fuji/epartners/PRNewsDetail.jsp?DBID=NEWS_853512&CAT_ID=23383820 http://209.85.165.104/search?q=cache:2AdHJaKSmV0J:www.fujifilmusa.com/JSP/fuji/epartners/PREventDetailPage.jsp%3FDBID%3DNEWS_842829+fujifilm+dvd+research&hl=en&ct=clnk&cd=6&gl=us&client=safari
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Strategic Management – Optical Media Storage Industry Analysis
Verbatim
Strategy
M&A/Partnership Independent company since 1969 Subsidiary of Mitsubishi Chemical Corporation Collaboration with Big Fish Games
Product lines CD-R – Jewel Cases; Spindle; LightScribe; Digital Vinyl; Photo; Music;
Archival Grade; Pocket; Inkjet: Thermal; Silk-screening; MediDisc CD-RW – 2x-4x; 2x-4x Inkjet; 4x-12x Speed; 16x-24x Speed; 32x Speed DVD+R – Jewel Case; Spindle; in Video Boxes; LightScribe; Photo; Inkjet;
Thermal; Silk-Screening; DVD+R Dual Layer – 2.4xSpeed; 2.4x Mini; 2.4x inkjet; 2.4x Thermal; 8x
Speed DVD-R – Jewel Cases; Spindle; LightScribe; in Video Boxes; Photo; Archival
Grade; Mini; Thermal; Inkjet; Silk-Screening; MediDisc; Dual Layer DVD+RW – 4x Speed; 4x Inkjet; 4x Mini; 8x Speed DVD-RW – 1x Speed; 2x Speed; 2x Mini; 4x Speed; 6x Speed DigitalMovie DVD DVD-RAM DVD-R for Authoring – Branded; Printable
Marketing Advertising a toll free number for all product support for
customers.
Objective Maintaining market share
through high quality control Parent company carries out
research strategically pertinent to the company’s future.
Assumptions
None
Capacity Recognized for superior
manufacturing practices Strong R&D through parent
company Mitsubishi Chemical
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Strategic Management – Optical Media Storage Industry Analysis
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